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Determinants of Renewable Energy Deployment in
Developing Countries
A macro-econometric analysis of the power sector
(in an early stage)
Birte Pohl, Steffen Schlömer
5 April 2011
Outline
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Research Question and Motivation
Review of the Literature
Model
Data
Proposed Methodology
Concluding Remarks
Birte Pohl, Steffen Schlömer
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Motivation
• Climate change mitigation requires a decarbonisation of the
energy sector
• Renewable energy technologies (RETs) are an important
means to achieve a low-carbon energy sector
• Research and development of RETs has mainly been
conducted in industrialized countries
• BUT, developing countries (DCs) also need to deploy RETs to
follow a low-carbon development pathway
• The literature on technology diffusion suggests several
barriers for cross-country technology diffusion
Need to know more about relevant determinants of RET
deployment in DCs!
Birte Pohl, Steffen Schlömer
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Relevant Literature
• Empirical papers on cross-country technology diffusion
• Comin and Hobijn (2004)
• 25 technologies in 23 industrialized countries over 200 years
• Most important determinants: human capital endowment,
type of government, degree of openness to trade, adoption of
predecessor technologies
• Brunnschweiler (2010)
• 5 RE technologies in up to 119 non-OECD countries over 30
years (1980-2009)
• Shows that financial sector development has a significant
impact on RE deployment
• Significant results only for hydropower & geothermal power
Birte Pohl, Steffen Schlömer
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Model Specification
yit   0   it x'it uit
yit =
xit =
i =
t =
dependent variable
vector of control variables
country
time
Birte Pohl, Steffen Schlömer
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Dependent Variable: Power Production from RETs
• Source: US Energy Information Administration
• Subset of the available 226 countries from 1980 – 2008
• Data for total renewable power production disaggregated into
5 generic technologies:
•
•
•
•
•
Hydropower
Combustable biomass and waste
Geothermal power production
Wind power production
Solar, Tide and Wave Power
Discussion points:
per capita, per GDP, or per total TWh
Birte Pohl, Steffen Schlömer
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Power share from Solar and Wind in DCs
.04
.03
Cape Verde
Costa Rica
Costa Rica
.02
Latvia
Lithuania
Morocco
.01
0
1985
1990
Birte Pohl, Steffen Schlömer
1995
2000
2005
2010
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Power share from Geothermal and Biomass in DCs
.4
.3
Argentina
Bolivia
.2
Brazil
Colombia
Chile
Costa Rica
.1
0
1985
1990
Birte Pohl, Steffen Schlömer
1995
2000
2005
2010
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Which DCs Should We Focus on?
• Possibilities:
• All DCs, i.e. middle and low income countries acc. to World Bank
• Country cluster based on PIK (2004), e.g. „energy and carbon
hungry small emitters“, …
• Non-OECD countries
Birte Pohl, Steffen Schlömer
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Control Variables
General macroeconomic variables
Variable
Proxy
Rationale
Level of
economic
development
Log real GDP
p.c.
Higher capacity to invest, higher value
assigned to environment (higher WTP)
Country
openess
Trade/FDI flows Remedy for lack of local capacity to
innovate/manufacture/operate, inflow of
information about RETs
International
Assistance
ODA
Better access to capital, finance,
technology, skills, …
Financial sector
development
Access to
finance
High financing cost due to high upfront
cost of RETs
Human capital
Enrollment
rates, school
completion
Birte Pohl, Steffen Schlömer
rates, …
Capacity to innovate/ manufacture/
operate/ regulate/ …
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Control Variables
Variables related to social and environmental aspects
Variable
Proxy
Rationale
Skill labour
inflow
Migration data
Inflow of skills, information, …
Energy security
energy _ imports
energy _ consumption
RETs can reduce dependence on fossil
fuel imports
Local Pollution
other GHG
emissions
Negative effect on health from fossil fuel
combustion, but not RET
Public
awareness of
environmental
problems
Interviewbased
qualitative
indicator
Renewables perceived as solution to
environmental problems
Birte Pohl, Steffen Schlömer
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Control Variables
Institutional variables
Variable
Proxy
Rationale
Institutional
sustainability
Voice and accountability, political
stability and absence of violence,
government effectiveness,
regulatory quality, rule of law,
control of corruption
Investor confidence,
low risk mark-ups, …
IPR enforcement ?
Willingness to invest
may depend on
protection of patented
technologies
Environmental
regulation
Proxy for political
willingness to support
RETs
Participation in international
environmental agreements, …
Birte Pohl, Steffen Schlömer
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Control Variables
Technology related variables
Variable
Proxy
Rationale
Cost of local
alternative
energy supply
Electricity
prices, fossil
fuel prices
Relative advantage/disadvantage of RET,
competition with alternative power
supply options
RE resource
potential
GIS data, other
Quality of the resource affects the cost of
electricity from RETs
RE subsidies
Binary data for
variety of
subsidy types
Relative cost advantage from private
investor perspective
Electricity grid
infrastructure
?
Complementary technology with variable
RETs
Birte Pohl, Steffen Schlömer
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Proposed Methodology
• Basic panel estimations:
• Pooled OLS
• Fixed Effects
• Random Effects
• More sophisticated approaches:
• Arellano-Bond GM
• IV
• …
Birte Pohl, Steffen Schlömer
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Concluding Remarks
• Still a lot to do …
Birte Pohl, Steffen Schlömer
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